Starting Annual Recurring Revenue
The annualized recurring revenue balance carried forward from the prior period — your opening ARR for the month.
◆ Currency
Formula
Built from
What it measures
Starting ARR is the opening annualized balance for your period — the previous month's Closing ARR carried forward, unchanged. It is the annualized equivalent of Starting MRR and equals Starting MRR × 12. It is the fixed baseline against which you measure new, expansion, contraction, and churned ARR during the current period. It is not recomputed from active contracts; it is a direct reference to where last month ended, annualized.
Why it matters
You need a clean opening position because ARR movement only makes sense in context. Finance reads Starting ARR to anchor the bridge from prior month to current month — it is the leftmost bar of the annualized revenue waterfall and the denominator for every growth-rate calculation. Operations uses it to set annual bookings quotas and churn budgets against a known base. Investors look at whether your opening ARR base is stable or volatile, since a noisy baseline makes every downstream growth rate and valuation untrustworthy.
How to read it
Starting ARR should be identical to the previous month's Closing ARR — no restatement, no catch-up. If the two numbers disagree, you have a data integrity issue, not a business event. Compare Starting ARR month-to-month to see if your annual run-rate is growing (good) or shrinking (last month's net-new was negative). Always pair it with month-end Closing ARR to read the motion: started at $1.2M, ended at $1.332M means +11% month-on-month. On its own, Starting ARR tells you almost nothing — its value is as the anchor for everything that moves on top of it.
What good looks like
Good
Starting ARR grows every month because prior periods' net-new ARR consistently outpaced churn and contraction.
Watch
Starting ARR is flat or cycling month to month — a sign last period's growth stalled or new bookings and churn roughly cancelled out.
Bad
Starting ARR is shrinking month-on-month, meaning the prior period's churned and downgraded ARR overwhelmed new and expansion bookings.
Watch-outs
- Not locking it to the prior period's Closing ARR. Starting ARR must equal last month's ending annual run-rate exactly; any gap means the ARR waterfall no longer reconciles and growth-rate math is built on sand.
- Restating or adjusting it after the period has begun. Once the prior period closes, Starting ARR is frozen — corrections belong in the prior period's Closing ARR and only then flow forward.
- Confusing it with Closing ARR or the month's net-new. It is neither an ending run-rate nor a measure of motion — it is purely a carry-forward of where you started the period.
- Letting timing leakage contaminate it. A customer who signs on day one of the new month is New ARR, not Starting ARR; one who churns on the last day of the prior month is already excluded — misclassifying either inflates or deflates the opening base.
Worked example
Hypothetical
If June closed with $1.2M ARR (equivalently, $100K MRR), July opens with $1.2M Starting ARR. During July you add $144K new and $48K upsell (annualized), lose $24K downsell and $36K churn — ending July at $1.332M, which becomes August's Starting ARR.